Reports surfaced Thursday that the Charlotte bank was a candidate to rescue the No. 4 investment bank, which is weighed down by soured real estate investments. The United Kingdom's Barclays Plc is also interested, the Financial Times reported.

Reports cast doubt on whether the government would get involved in a Lehman takeover, as it has in rescues of investment bank Bear Stearns Cos. and mortgage giants Freddie Mac and Fannie Mae.

Bank of America spokesman Scott Silvestri declined comment.

Lehman shares, down more than 90 percent this year, fell 9.95 percent in morning trading to $3.80. Bank of America Corp. shares were up less than 1 percent to $33.31.

In a research note this morning, analyst Dick Bove of Ladenburg Thalmann & Co. Inc. said he expected Bank of America to win a bidding war. Such a deal would lower Lehman's borrowing costs and give it access to the bank's commercial customers, Bove wrote. Bank of America would get a top bond trading desk and beef up its stock offering business, he said.

“This deal would be a major plus if the bank wins it,” Bove wrote.

A Bank of America-Lehman merger would shoot the combined company up the so-called “League Tables” that tally Wall Street business, particularly in bond work, analysts at CreditSights wrote. A deal also would produce an even more dominant player in mortgages, from origination to the packaging of the loans into securities.

On the down side, a Lehman purchase could saddle Bank of America with a huge batch of troubled real-estate loans. Some of the risk could be lessened in a deal with the government, or Bank of America could take on the loans and work them out over time, CreditSights said.